Half Year 2026 Banque Cantonale Vaudoise Earnings Call Transcript
Key Points
- Banque Cantonale Vaudoise (WBO:BCVN) reported a 5% increase in net profit to CHF225 million, driven by continued growth across all business sectors despite the low-interest-rate environment.
- The bank's diversified business model, particularly in private banking and asset management, helped keep revenues slightly up despite challenging market conditions.
- Cost management was effective, with overall costs (including personnel, operating expenses, and amortization) rising only 1%, contributing to improved profitability.
- Customer deposits saw a strong net increase of CHF1.1 billion, even after accounting for a major client withdrawing funds, indicating robust client trust and business momentum.
- The bank benefited from the UBS-Credit Suisse merger, capturing new pension fund mandates and institutional asset management inflows, with expectations of further gains as the process continues.
- COVID-19 bridge loans showed strong repayment rates (93% paid back), reflecting the resilience of the Swiss economy and low credit risk for the bank.
- The bank maintains strong credit ratings (Moody's and S&P) and high ESG ratings, enhancing its ability to sell structured products and attract clients.
- Assets under management increased to CHF142 million, with two-thirds of the growth from market performance and positive net new money across various client segments.
- The bank's mortgage business continues to grow, supported by population growth and low vacancy rates, with expectations of sustained demand over the next 2-3 years.
- The IT insourcing process is complete, with no further cost impacts expected, providing clarity on future expense run rates.
- The low-interest-rate environment continues to pressure net interest income, with the bank relying on transfer pricing models that shift profits to the corporate center, limiting retail banking profitability.
- Trade finance business is expected to remain subdued for the next 2-3 years due to geopolitical tensions, including the US-Iran conflict and Russia-Ukraine war, limiting growth in this area.
- Risk-weighted assets increased by nearly 5% year-on-year, partly due to mortgage growth and a one-time capital increase for the last decade, which could pressure capital ratios if growth continues.
- The competitive environment is intense, particularly in the mortgage and wealth management sectors, with UBS being more aggressive in rebuilding market share, making it challenging to grow faster than the market.
- The bank's high market share in retail (45-50%) and SME lending (40-50%) limits its ability to achieve growth rates significantly above market levels.
- Geopolitical uncertainties and potential Swiss franc appreciation could negatively impact exporters and the broader economy, affecting the bank's business outlook.
- The bank's CET1 ratio saw a slight decrease due to strong mortgage growth and increased risk-weighted assets, indicating potential capital management challenges.
- Net new money growth was primarily driven by deposit inflows from the UBS-Credit Suisse merger, rather than organic growth, which may not be sustainable in the long term.
- The bank remains cautious about the economic outlook, expecting growth close to 1% this year, with uncertainties around US trade policy and geopolitical risks.
- The bank's reliance on the Swiss real estate market, which is driven by immigration, could face risks if immigration patterns change or if construction catches up with demand.
(audio in progress) Let me just directly on page four to tell me what I consider are the key messages of our H1 results. Basically, BCV is doing quite well with the continued growth in all business sectors. Revenue are slightly up despite the negative or the low-interest rate environment due to our, let's say, business model, which is quite diversified, the most diversified terms of revenues of all continental banks due to private banking and asset management.
And then in this uncertainty world and also in this environment of, let's say, very low interest rates, we try to master and to control very tightly our cost. And you see that the overall cost, meaning your personal cost, operating expense, as well as amortization are up only 1%. Basically, this result in a net profit of 5% compared to last year, CHF225 million.
Then, I go directly on page six. You see the different business value, mortgage, other loans, deposit, so everything is up. In terms of deposit, you have to add. The two
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